Retirement Education in the Workplace

By Krajnak, Patricia A.; Burns, Sharon A. et al. | Financial Services Review, Summer 2008 | Go to article overview

Retirement Education in the Workplace

Krajnak, Patricia A., Burns, Sharon A., Natchek, Sally M., Financial Services Review


In recent years, households have been expected to take more responsibility with respect to personal financial decisions. Workplace financial education is viewed as a means to help employees deal with the increasingly complex financial choices they face. This article provides an overview of literature that has examined the prevalence and effectiveness of personal finance and retirement education programs in the workplace. Results of a survey by the International Foundation for Employee Benefit Plans provide insight concerning the methods of delivery, topics covered and which workers are eligible to participate in workplace financial planning programs. The research suggests that those who participate in financial education seminars change their savings goals and behaviors in a positive way. At present, group meetings and workshops are the most popular method of program delivery in the workplace; however, web-based tools are gaining in popularity.

Keywords: Financial education, Personal finance education, Workplace education, Retirement planning

1. Introduction

During the past five years, financial literacy has become one of the "hot topics" of governmental entities, the news media, and charitable foundations. The increased interest is driven by public policy initiatives focusing on more personal financial responsibility, high levels of consumer debt, low personal savings rates, and demographic shifts, including the impending retirement of the Baby Boom generation. Households are being called upon to make an increasing number of complex financial decisions. "Wise choices" are often individual; a course of action that may be best for one family may not be appropriate for another. As a result, individuals and households are increasingly being encouraged to use financial counseling or planning services, particularly in the workplace, and specifically for retirement planning.

Most often, workplace financial education programs focus on successful retirement planning. Employer efforts may be in response to the Employee Retirement Income Security Act (ERISA) and initiatives of the Department of Labor that encourage employers to help employees better understand employer-sponsored retirement plans. The Pension Protection Act of 2006 (PPA) includes provisions protecting employers from liability if they offer investment advice as long as the requirements of the Act are met. In May 2008, the ERISA Advisory Council's Working Group on Financial Literacy of Plan Participants and the Role of the Employer released its report concerning best practices in retirement education; the report included suggestions for topical coverage and delivery mechanisms.

Policymakers, employers, employees, and financial professionals generally agree that there is a strong need for retirement education and planning services in the workplace. The purpose of this paper is threefold: (1) to survey published research focusing on retirement education in the workplace; (2) to share the results of a survey of over 300 employers regarding the provision of retirement and financial planning programs in their workplaces; and (3) to offer suggestions for best practices in providing retirement planning services in the workplace.

2. Review of literature

Financial and retirement education provided by employers is often fhe only exposure many employees have to this type of information. Retirement planning education in the workplace is desired by both employers and employees for a variety of reasons. Employees are being given increased responsibility for their personal retirement planning. This includes decisions concerning the amount to save for retirement as well as where to invest retirement funds. There are also decisions concerning when to retire, when to begin Social Security benefit payments and how to manage the distribution and expenditure of retirement plan funds. Employers are concerned about employees' financial management behavior on a variety of fronts. …

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